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Capital Planning Considerations for
Airport Improvements
Thursday, October 10, 2013
Information on ACRP • www.TRB.org/ACRP • Regular news and updates
on: o Upcoming and ongoing
research projects o New publications o Success stories o Announcements o Webinars
• Find ACRP on Facebook and LinkedIn
Ways to Get Involved in ACRP
• Submit a research idea, also called a Problem Statement
• Prepare a proposal to conduct research
• Volunteer to participate on a project panel; Travel expenses are reimbursed
• Apply to be an ACRP Ambassador or member of the ACRP Speakers Bureau
• Use our research results
Upcoming ACRP Webinars
• November 7th – Airport Emission Inventories and Reduction Strategies
• December 11th – Airport Sustainability Practices and Strategies
You can learn more about these webinars by visiting the www.trb.org/webinars
Today’s Speakers Moderated by David Cushing, FAA
1) Overview of ACRP Report 68: Evaluating Terminal
Renewal Versus Replacement Option • Joe Chang and Jeff Schultess,
Ricondo & Associates
2) Overview of ACRP Synthesis 25: Strategies for Reuse of Underutilized or Vacant Airport Facilities • Lois Kramer, KRAMER aerotek inc.
3) Overview of ACRP Synthesis 13 : Effective Practices for Preparing Airport Improvement Program Benefit-Cost Analysis • Steve Landau and Glen Weisbrod,
Economic Development Research Group, Inc.
ACRP Report 68: Guidebook for Evaluating Terminal
Renewal Versus Replacement Options
Ricondo & Associates, Inc. Joseph Chang
Jeffrey Schulthess
In Association With: Kohnen-Starkey, Inc.
Faith Group, LLC
Joseph Chang Principal Investigator
• Vice President, Ricondo & Associates • Registered Architect • Terminal Planning
Jeff Schulthess Financial Analyses
• Vice President, Ricondo & Associates • 20+ Years Experience • Airport Business/Financial Planning
ACRP Report 68 Oversight Panel
Angela Newland, Broward County Aviation Department Panel Chairperson Roddy Bogus Parson Brinkerhoff Kenneth Bower American Airlines, Inc. Jon Cimperman Port of Oakland Kiran Merchant Port Authority of New York & New Jersey Gregory Wellman Parson Brinkerhoff Teresia Schatz Transportation Research Board, ACRP, Senior Program Officer Elisha Novak Federal Aviation Administration Liaison
ACRP Report 68: Guidebook for Evaluating Terminal
Renewal Versus Replacement Options Guidelines for conducting a business-driven evaluation of competing options to renew or replace terminal facilities that is repeatable and scalable to airports of varying sizes.
• Published in 2012
• Discusses the Conditions and Environment for Terminal Redevelopment
o Common Motivations
o Contributing Factors and Guiding Principles that Influence the Evaluation Process
• Four Step Evaluation Process
Terminal Building Life Cycle
Source: Life-Cycle Analysis Primer, U.S. Department of Transportation, Office of Asset Management, August 2002; Prepared by: Ricondo & Associates, Inc., June 2011.
Common Motivations for Terminal Redevelopment
• Building Age and Physical Condition • Air Service Changes • Functional Obsolescence • Optimize Use of Multiple Terminal Buildings • Related Airport Development and Airport Master
Plan • Civic Aspirations • Availability of Funding
Factors That Influence the Evaluation Process
• Governance • Historic/Current Market Conditions • Aviation Activity Forecasts • Strategic Plan • Financial Capacity • Revenue Growth and Diversification • Inventory Conditions • Functionality • Capital Improvements Program • Regulatory Compliance • Funding
Evaluation of Options in the Context of Overall Planning for Terminal
Redevelopment
Evaluating renewal versus replacement
options is only a phase of a larger process for
redeveloping a terminal.
Airport Roles in the Terminal Planning Process
Basic Principles for Conducting an Evaluation
• Provide clear unbiased statement of the project objectives.
• Investigate reasonable alternatives that satisfy a given program objective and conforms to the airport’s Strategic Plan.
• Consider alternatives in terms of its life cycle (total) costs, operational and functional benefits.
• Document all assumptions and factors that contribute to decisions.
• Ensure that an appropriate balance is maintained between: an airport’s capital needs; an airport’s ability to pay for capital projects; and affordability to the airlines.
Four Step Evaluation Process • Step 1: Understand the Airport’s Strategic Goals
• Step 2: Refine Redevelopment Objectives and Generate Options
• Step 3: Evaluate Options
• Step 4: Make Recommendation with Clearly Stated Assumptions
Step 1
Step 1
Step 2: Refine Redevelopment Objectives and Generate Concept Options
Step 3
Step 3
Detailed Financial Analysis / Typical Airport Financial Model
Airline Cost Per Enplanement (Current Year Dollars)
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Terminal Renewal Terminal Replacement
For additional information: ACRP Report 68: Guidebook for Evaluating Terminal Renewal Versus Replacement Options http://www.trb.org/Main/Blurbs/167299.aspx Joseph Chang [email protected]
Jeffrey Schulthess [email protected]
Strategies for Reuse of Underutilized or Vacant
Airport Facilities
Lois Kramer October 10, 2013
ACRP Synthesis 25
The Team
Research Agency – KRAMER aerotek inc.
Senior Program Officer – Gail Staba
Panel William Randell Forister, Pittsburgh International
Christine Gerencher, TRB
Brandon Mark, Port of Oakland
John Walewski, Texas A&M University
David Cushing, FAA
Lois Kramer Principal Investigator
Principal Investigator on ACRP Synthesis 48: How Airports Measure Customer Service Performance
Principal Investigator on ACRP 01-15: Innovative Revenue Strategies
CEO of KRAMER aerotek, an aviation consulting firm
What’s in the Synthesis
1. Overview of the root causes and issues surrounding reuse of aeronautical facilities
2. Exploration of short and long-term solutions
3. Case studies of reuse situations
4. Steps airports can take to reduce surprise and risk
As They Lose Traffic, Once Bustling Airports Have Space to Rent
The vacant D concourse at Lambert-St. Louis International Airport New York Times, July 9, 2012
Commercial Airports of All Sizes Have Experienced Capacity Reductions
-8.8%
-26.2%
-18.2% -15.4%
Large Hub
Medium
Hub
Sm
all Hub
Non-H
ub
% Change in Domestic Departures 2007-2012
Excess terminal space has occurred unevenly throughout the system….
Change in Enplanements, 2000-2012 at U.S. Hubs
-1% -1% -3% -5% -6%
-10% -10%
-14% -18%
-31% -34%
-41% -59% -61%
-74% 1% 3% 8% 9% 12% 14% 15% 16% 16% 16% 17% 19%
34% 40%
52% 75%
Dallas-Ft. WorthNewarkLos AngelesChicago O'HareMinneapolis-St. PaulDetroitPort ColumbusRaleigh/DurhamKansas CityClevelandSan JoseMemphisSt. LouisPittsburghCincinnatiSalt Lake CityAll Primary AirportsPhoenixSan FranciscoWashington DullesLas VegasMiamiBaltimoreSeattleHouston IntercontinentalAtlantaPhiladelphiaChicago MidwayDenverNew York (JFK)Charlotte
Types of Vacant/Underutilized Facilities
Terminals and
Concourses Cargo
Facilities Maintenance
Facilities
Hangars Military Base Closures
Non-Aeronautical
Buildings
Reuse Roadmap
Case Studies
Synthesis Findings Vacant/underutilized facilities at airports are
widespread. While lease expirations and changes in
ownership occur regularly in property management, rejection of leases during bankruptcies can result in sudden and large reductions in airport revenues and instant ownership of facilities (often obsolete).
Unexpected return of facilities back to the airport will require immediate funds maintenance, reuse, or demolition.
Synthesis Findings (continued)
Revenue replacement is difficult in the short run.
Reuse of aeronautical facilities for non-aero purposes is complex and expensive (security, grant assurances, AOA’s, environmental cleanup, stakeholder support) and typically takes years to accomplish.
Synthesis Conclusions
Take decisive action on reuse or demolition options that include adherence to specific timelines associated with each option.
Keeping a vacant facility alive preserves options, but it is expensive. Sometimes demolition is the lowest cost option.
Unanticipated facility ownership requires additional airport operating and capital funds.
Expect that securing new tenants will take awhile and require an extensive marketing effort.
Additions to Property Management Toolbox Risk Analysis for Vacancies
• Evaluate vacancy risks annually. • For highest risks, develop mitigation plans
and incorporate reserve funds into budget cycle.
Lease Protections • For new leases, institute provisions that
protect the airport in event the lease is suddenly terminated such as letters of credit naming the airport as the sole beneficiary to guarantee funds are available for reuse or demolition of a property. (Continuously enforce.)
• Understand environmental, safety and security requirements for vacant properties.
• Develop a cost estimator to evaluate options to maintaining, reuse, or demolish a property.
• Plan future airport facilities for flexible use, changes in demand, and new technology.
Additions to Planning Toolbox
Thanks for listening. Challenge us with your questions.
Check out ACRP Synthesis 25 Strategies for Reuse of Airport Facilities http://www.nap.edu/catalog.php?record_id=14592
To discuss facility reuse or airport
business planning, please contact:
Lois Kramer KRAMER aerotek inc. 303.247.1762 [email protected]
ACRP Synthesis 13: Effective Practices for Preparing
Airport Improvement Program Benefit-Cost Analysis
Steven Landau
and Glen Weisbrod
Economic Development
Research Group, Inc.
Steven Landau Co-Principal Investigator
• Vice President and Aviation Practice Leader of Economic Development Research Group
• President and Founder of Economic Development Research Group
Glen Weisbrod Co-Principal Investigator
ACRP Synthesis 13 Topic Panel Woods Allee, Denver International Airport
Rob Brancheau, Orlando International Airport
Scott J. Bascom, Vermont Agency of Transportation
Jeffrey Cohen, University of Hartford
Mitchell Holmes, PBS&J, Fort Worth, TX
R. Douglas Trezise, Ricondo & Associates, Inc. Chicago
Larry Weber, Oregon Department of Aviation
Alex Zaslov, Simat, Helliesen & Eichner, Inc., Washington, DC
Joseph Hebert, Federal Aviation Administration (Liaison)
Robert Samis, Federal Aviation Administration (Liaison)
Christine Gerencher, Transportation Research Board
Gail Staba, ACRP Senior Program Officer
• Define and describe benefit assessment techniques used by airports as well as other modes
• Highlight best practices and identifies inconsistencies of how benefits are calculated and where there is confusion in the FAA benefit-cost guidance.
• Focus on GA and small commercial airports
• Published 2009
ACRP Synthesis 13: Effective Practices for Preparing Airport Improvement Program Benefit-Cost Analysis
Approach
• Literature review to define benefit – cost analysis
• Examine benefit –cost guidelines for all U.S. modes
• Review of 117 benefit-cost studies submitted to FAA for AIP grants from 1998 through 2008, including in depth review of 24 BCA studies, with FAA evaluations, correspondence with proponents & multiple submissions
• Identify proposed airport improvements and reviews similarities and differences of how benefits and costs are calculated for each type of improvement
• Case studies of funded projects, using documentation and interviews with airport managers, consultants who prepared BCA studies and (current and former) FAA staff
Hubs are 4% of NPIAS Airports and account for 60% of BCAs Submitted
Large Hub Primary
26%
Medium Hub Primary
18% Small Hub Primary
16%
Non-Hub Primary
15%
Non-Primary Commercial
Service 2%
Reliever 2%
General Aviation
21%
Relievers & GA are 85% of NPIAS Airports and Account for 22% of BCAs Submitted
Airport Class Total NPIAS Airports
BCAs Submitted
BCAs Accepted
Hub 139 71 46 Other Commercial 360 20 10 Reliever & GA 2,831 26 14
Totals 3,330 117 70
Typical FAA Processing of BCA Submissions
APO 200 may point out flaws in BCA to APP 500, which then communicates these flaws to proponent. Iterations of the BCA may
Airports Division for Decision
Policy Office (APO 200) for BCA Review
Airports Division (APP-500)
Project Proponent (airport & consultant) FAA Regional Office
Agree on base case
BCA Studies by Project Type
N = 117
BCA Studies by FAA Disposition
N = 117
Benefit Measures in BCAs Reviewed
Percent of BCA Studies
N = 24
FAA Disposition of BCA Studies by Airport Class
N = 117
Outcomes of Reviewed Projects
Disposition BCAs Reviewed
% of Total Submitted
Accepted 16 67% Partially/Conditionally Accepted 2 8% Regional Decision 2 8% Withdrawn 2 8% Not Accepted 1 4% Pending - Ongoing FAA Review 1 4% Total 24 100%
Case Study Project Examples • GA runway extension to serve corporate jets. Partially
accepted by FAA. • Proposed new small hub to consolidate commercial service of
two airports. Not accepted by FAA. • Reliever runway extension to better serve a reliever regional
airport for corporate jets. Accepted by FAA. • Small Hub to develop new (replacement) runway to meet rise
in forecast aviation demand. Accepted by FAA. • GA runway extension to allow reliable operation of larger
aircraft to improve response to oil spills in the LA Gulf. Accepted by FAA.
• GA runway extension to improve airport ability to facilitate just-in-time deliveries to local manufacturers. Accepted by FAA.
Expanding the Aviation Community
FAA acknowledges that aviation dependent activities may be a valid basis for Benefit – Cost Analysis.
Demonstrated by favorable consideration of the:
1. Economic necessity for just-in-time deliveries to manufacturers off-airport; and
2. Economic benefit of cleaning up oil spills in the Louisiana Gulf.
Discount Rate Set BCA Hurdle
Discount Rate PV Benefit* PV Costs* NPV* BC
Ratio 10% $10,925 $ 7,346 ($3,579) 0.67 7% $11,700 $10,549 ($1,151) 0.90 5% $12,267 $13,368 $1,401 1.11 3% $12,881 $17,985 $5,104 1.40
• Example: Sum of Nominal Costs equals $13,900,000 and sum of nominal benefits equals $28,000,000.
*All dollars are in thousands
Net Benefit Value Differs from Benefit/Cost Ratio
Project PV of Benefit*
PV of Cost*
Net Present Value (Benefit–Cost)*
B/C Ratio (Benefit/Cost)
A $36 $30 +$6 1.2 B $ 3 $ 1 +$2 3.0 C $ 8 $10 -$2 0.8
* Figures are in Millions
BCA Guidance Varies by Mode
Values of Passenger Time Vary by Mode
(+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007). (+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007). (+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007). (+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007). (+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007).
(*) indicates that values increase annually with inflation
(+) indicates that values increase annually with inflation (e.g., the FHWA business value would rise to $25.30 for year 2007).
Other Differences Across Modes • FAA mandates a discount rate 7% rate
• Other modes allow lower rates based on more recent conditions • FAA guidance explicitly permits consideration of “hard to
quantify benefits” • Unlike other modal guidance documents.
• Safety benefits are handled differently in aviation BCA guidance than in any other modal guidance.
• Primarily because aviation crashes are extremely rare; however, when they occur, they can be very costly.
• Aviation guidance concerning freight delay includes: (1) the value of tied up inventory, (2) spoilage and (3) logistical bottlenecks
• Most highway-related guidance documents define freight time savings only in terms of the cost of operator and vehicle time. Logistics costs are recognized as a legitimate element of truck and rail freight in BCA guidance posted by the FHWA Office of Freight.
For additional information: ACRP Synthesis 13:
Effective Practices for Preparing Airport Improvement Program Benefit-Cost Analysis
http://www.trb.org/Publications/Blurbs/161751.aspx
• Steven Landau o [email protected]
• Glen Weisbrod o [email protected]